I am a Senior Fellow at the Cato Institute. A former Special Assistant to President Ronald Reagan, I also am a Senior Fellow in International Religious Persecution with the Institute on Religion and Public Policy. I am the author and editor of numerous books, including Foreign Follies: America's New Global Empire, The Politics of Plunder: Misgovernment in Washington, and Beyond Good Intentions: A Biblical View of Politics. I am a graduate of Florida State University and Stanford Law School.

Cut The Federal Budget By Killing Republican Sacred Cows

Other major beneficiaries are KBR Inc., General Electric, Pemex, and Caterpillar Inc. The foreign recipients of Ex-Im’s largesse are similarly anything but needy. Noted my Cato Institute colleague Sallie James: “the Bank typically has made its loans, guarantees, and insurance to countries such as South Korea, China, Mexico, and Brazil—countries that have had little difficulty in attracting private investment on their own.”

With ExIm’s charter expiring at the end of May (and close to hitting its statutory lending limit of $100 billion), the GOP had an opportunity to act on its rhetoric. Although Bank supporters claimed that the institution made money, that result required fixing the numbers.

Jason Delisle and Christopher Papagianis of Economic Policies for the 21st Century explained: “the Ex-Im Bank’s long-term loan guarantee program actually provides guarantees at a loss for taxpayers, not a profit. Moreover, this analysis reveals that the Ex-Im Bank’s loan guarantees are made at sufficiently generous terms that borrowers receive subsidies of about one percent of the amount borrowed,” which comes to more than $200 million on the $21 billion in loans to be extended this year. Worse, while the Bank’s formal cost is small compared to other business subsidies, the organization diverts credit from the general marketplace—where it could go to small businesses, students, competing exporters, domestic producers, or others—and channels it to a lucky few traders, who account for about two percent of U.S. exports.

This is supposed to create jobs? Observed the Wall Street Journal: “That’s job creation, French-style. The Ex-Im Bank extends taxpayer-backed loans, loan guarantees and insurance to the clients of some of America’s largest corporations, all of which have access to private financing.” More important, Ex-Im can only redistribute jobs, shifting credit away from less economically efficient uses to more politically favored ones. The fact that other governments mulct their taxpayers in similar ways to subsidize their exporters is no reason for America to do so. Observed Sallie James: “By diverting resources from the private sector, the bank’s activities produce a less-efficient economy and lower general standard of living than would occur in a free market for export finance.”

Instead of telling Big Business to do its own borrowing, the GOP House leadership agreed to a “compromise”—reauthorizing the Bank and gradually expanding its total exposure cap to $140 billion. It wasn’t just the GOP leadership which caved; 147 Republican House members also voted to subsidize corporate America. Most Republican Senators, such as Lindsey Graham of South Carolina, also backed Ex-Im.

One area where Republicans have been shamed into better behavior was pork, most notably earmarks. Despite GOP claims of fiscal responsibility, Republican legislators long used taxpayer money to get reelected. In fact, earmarks peaked at about $35 billion under the Republican Congress during the Bush era.

Although representing just one percent of the budget, earmarks reflect a deeper corruption, the shameless use of federal outlays to win reelection. Earmark defenders argued that earmarks merely shift power to award money from bureaucrats to legislators. However, in theory, at least, bureaucrats must follow some non-political criteria in distributing federal largesse. Lawmakers make no pretense of doing so. Two criteria typically loom large: contracts for campaign supporters and projects in a member’s district/state.

To its credit, last year the new Republican House banned earmarks. However, Rep. Mike Rogers of Alabama recently told the GOP leadership that the majority of members wanted to lift the prohibition. He was distressed that “right now we are prohibited from advocating for anything for our states,” meaning stealing taxpayer money to buy votes.

More recently, Rep. John Culberson of Texas—who chairs the military construction appropriations subcommittee—endorsed earmarks. He believed a particular military facility is more important than did the Pentagon. “I can’t move it,” he admitted: “it’s just nuts.” Rep. Rob Bishop of Utah complained that legislators couldn’t do things like transfer land to a city. He suggested giving earmarks a new name: “In Utah we call them ‘line-item’ spending or directed spending’.”

Well, that certainly would take care of the problem.

So far the House leadership appears to be standing behind the ban. But Sen. Thad Cochran (R-Miss.) said he views the earmark ban as temporary. If the GOP holds its House majority in the November vote, it’s hard to predict what will happen next year.

Government spends too much. Far too much. The president and Congress seem intent on turning America into Greece.

To avoid that fate, federal outlays must be slashed. Republicans have promised to do so, but it’s not enough to cut money for welfare and social services. Military expenditures—essentially foreign aid for allied governments—also need to be reduced. Corporate welfare like the Export-Import Bank should be eliminated. Pork, too, should be ended. If the GOP isn’t willing to cut wasteful federal outlays across the board, it won’t solve America’s budget crisis and won’t deserve the vote of the American people.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.